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tv   Bloomberg Markets European Close  Bloomberg  December 7, 2016 11:00am-12:01pm EST

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mark: we are going to take you from washington to rome and give you a couple of stories out of switzerland in the u.k.. here is what you are watching today. european thanks -- bankshares get a boost today. we will cover that plus a big settlement in the benchmark rigging scandal. julie: the italian prime minister tells twitter followers he will resign after sunday's referendum defeat. we will get his speech to the leadership of the democratic party. ceos of at&t and time warner are on capitol hill depending -- defending their proposed transaction over concerns the deal could hurt independent content producers.
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mark: have a look at where european equities are trading. we are 30 minutes to the end of the session. stocks are rising for the third day. here is the left-hand column. germany stacks up by 1.8%. is gaining. the only major currency that has fallen against the dollar today is the pound. it is down by 6/10 of 1%. the euro is up by roughly 4/10 of 1%. bonds deals are following -- are falling. we have the spanish 30 year low, the u.k. 10 year six basis points lower as well. and in your other column, let's have a look at some of the other big stories today. one of the stories we are focusing on, shares are unchanged. and is royal our homes dell
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this is the new name. it is going to plow money back into online. its cash reserves are swelling following the merger between the belgian and the dutch retailers. they are aiming to double online sales by 2020. free cash flows have increased to about a billion euros in 2017 from about 1.3 billion. fightmerged in july 2 heightened competition. will lead to annual savings of 500 million euros in 2019. i love this chart. the ecb meeting is tomorrow and the expectation is they will .xtend six months
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only a few looking for some sort of tapering to be announced. this is what the chart is about. traders see the meeting as bearing the greatest tail risk in nine months. this is overnight volatility in the euro-dollar cross. we are seeing it jumped today. ahead of anyghest thing this year. in march, the gauge rising to 35.06. another round of stimulus by the ecb. what a wonderful chart. let's finish off with this. palladium versus the old. a new order in precious metals. palladium may be heading for a price correction while gold, which has had the worst returns over that.
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, so says, thanks. this is gold relative to palladium, an 18 month low last week. 90 minutes into the trading day, how is it looking today? julie: not a lot of action for u.s. stocks. we have the dow and nasdaq trading a roughly unchanged fashion. the dow put in another record high earlier today. yet another closing record high in the s&p 500 is joining the dow. one of the top sectors once again is the financial with citigroup reiterating what some bank of america and jpmorgan , so you areay looking for those trading revenues to be up 20% in the fourth quarter. they have been on fire since the election. look at #btb.
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this is the s&p 500 bank index. we see it up a little more than 21% at points but it also suggests the rally may falter. it is well above 70 for the longest period of time this year. strategists have used it as a momentum -- indicator. speaking of down, oil is low for the second day in a row, three and a half percent after last week's rally. the department of energy actually fell more than expected. what could be weighing on oil here is that gasoline inventories were more than what investors were looking for. they more than doubled, weighing on oil, including murphy oil, williams and petroleum.
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there was also a building, cushing in particular. that is one of the other things weighing on oil prices. now, let's check in on first word news. erik johnson has more. thanks. president-elect donald trump says mitt romney is still in the running to be secretary of state. he says that he and the 2012 nominee have come a long way together despite romney's sharp criticism of trump. he said he will be announcing his choice soon. next week will be the time that i announce it and i have some other big announcements coming up today and tomorrow. very gooden met with reviews of the people who have chosen. meanwhile, there is a report that he has made his choice for secretary of homeland security. cbs news says it is retired marine corps general john kelly. belonging to pakistan's
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national carrier crashed with 48 people on board. police and the spokesman for the airline said all were killed. the plane crashed in a village near the town of haverhill and land.ver .t was traveling to islamabad a strong underwater earthquake has killed almost 100 people and destroyed dozens of buildings in indonesia. hundreds of people have been injured. the quake was a 6.5 magnitude that struck. more than 100,000 people died after an earthquake triggered a devastating tsunami. is endingime minister the speculation. he says he will resign a few hours from now.
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on sunday he said he would quit after voters overwhelmingly rejected a constitutional reform referendum. to stay onnt tried to provide political and economical stability. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am erik johnson and this is bloomberg. mark? mark: investors will be closely watching frankfurt tomorrow. the final policy decision of the most economists expecting the bank to extend beyond march of the current rate. how will it affect the euro? joining us now, jeremy stretch. jeremy? i have to bring this up. i was just showing it and at the top of the hour, overnight ,olatility euro-dollar interesting. second-highest of the year going
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into a meeting. what does that tell us? >> i think that is absolutely true. we had a one-week volatility rolling over and that also spiked. it is really just underlining the fact that although there is some relative widespread will extend the ecb
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their bond buying program probably about six months through 2017. there is prospect that we are getting close. -- the italian up italian vogue last weekend, rather than saying we will buy out until september, perhaps moderating language is buying up to it. because of the uncertainty of the relationship to italy, that story is back in the spring. >> my favorite euro chart for tells the story. in the beginning of 2015, when druggie announced, he implemented in march. look at the circle. that was december last year. leading up to that meeting there expectation that ecb was going to go big. the euro rose by 3%. that druggie is it
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-- that draghi manages expectations. tomorrow the meeting sees the updated economic 2019, it rolling up to may be the case, if you feel it more appropriate, rather than just the mechanism now. weight untilttle, the january meeting. if they were to do that, the implications from a market arepective that they waiting for an opportunity for a tapering type scenario. the euro would be rather stronger. will be once again another repeat of 2015. that is a story i have been holding onto. this year, with the fed in the markets getting long dollars, and the euro having a little bit of a squeeze going into the end of the year. julie: could we actually see that repeated next year? the italian referendum is not only risk event. we have several elections next year. could that further constrain the to tapering?omes >> absolutely. of populisme extending during the first half course we havef the dutch referendum it mid-march and then into the french presidential election. if those were to see populist administrations and populist leaderships, that would potentially constrain the probability. at this juncture i think our yes, we would be that will get a second round of french presidential elections, win and thent those in the freedom party would do well but not be the governing party. there are risks and political
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risk continues to be a strong story that drives current markets. but it is in our best case scenario that they will be to blow it enough off course. that we have to be mindful of those concerns. >> if you have this scenario, i tactically and strategically, what kind of hedges are you putting on to eventualityt the and how does that compare with how you played 2016? >> i think the way that i would it is there are three components. you have short-term events and data, which we see on a daily basis. we have the longest structural concerns in growth dynamics and the third variable is the political one and that is the 2015.iving it will be a definitive factor in 2017 as well. if we are right our base case scenario will be this. we will see tapering start to come through. is closure of the balance sheets. it will not continue at its current pace. that is a degree of confidence that we are not going to see. we are looking for a stronger q4 2017 then we are in europe backmay see into the 116 area next year. australia and new zealand, it will be lovely to talk about those nations because we have had a lot of news. contraction in the australian economy. which currency is your preferred out of the two? >> it is a question of which is the least worst because both have -- not problems but they need to be a little bit cheaper. if we do have a political risk, in which case the favorite candidate might not have a clear run for the leadership, he might step down so that risk is also underlying dynamics and it suggests that the kiwis should be trading near 69 on the dollar but also from an aussie perspective, then that starts to bring the army back into play. there is greater downside risk in the kiwi than the australian dollar. mark: jeremy stretch, head of g 10 fx strategy. we will bring you live coverage of ecb president mario draghi. 10:30 -- 1:30 p.m. in london. julie: there is breaking news coming out. abbott laboratories has filed to terminate its proposed acquisition. there was contention between the ere'snies over al billing practices so that argument some questions about whether this was going to go through that abbott labs is
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filing suits to terminate the proposed acquisition. we will keep monitoring it. ♪ this is bloomberg. ♪
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julie: from new york, i am julie hyman. mark: from london, i am mark barton. 12 minutes away from the end of the wednesday session here. two big stories today. chase has find jpmorgan $521 million for collusion. the eu says it conspired to rate the arrival rate.
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-- $1 billion in offenses. donate us now is michael, who covers the bank for us. how may times will they have to adjust the turnaround plan? >> he laid it out in october of 2015 and came back with some saying the markets were not exactly cooperating with our push for increased revenue so we have to be more aggressive. >> if it comes up, i suppose the share price reaction says it is. focus on coste to cuts rather than revenue growth? >> i think you had some skepticism from the outset when they laid out this plan a year ago. inseemed very optimistic growth assumptions and you are seeing the banks come back on those. we will lock goes back a little bit.
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cost cutting is a little more in the banks control than the revenue side but certainly the market seems to like it. you have measures in the week leading up to calling for some more cost-cutting. the bank seems to understand the market system. julie: it is a very busy day for the sectors you cover. thee is a settlement in coal allf jpmorgan and paying $521 million. how do those fines measure up, how severe are they? >> certainly, this is one of front,ses on the reading if you will. youhe rigging front, if will. there are similar cases from the european commissions on antitrust efforts from the banks sharing information with each
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other. the fines are not the biggest we have seen what they certainly are of reasonable size and the banks have come out and said that they may have heelys and may fight these. obviously, jpmorgan and agricole , their statements are little stronger given hsbc find much lower -- fined much lower. julie: i want to ask you about italian banks as well. the latest there as we await what looks like it is going to be the resignation of matteo renzi today. so what is the latest on that? >> there seems to be some optimism in the market about the potential for the state to step in.
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there has been reporting that the state has a plan in place theirpossible stepping in -- stepping in and the markets seem to be rallying around the italian banks which are basically up. it is more optimistic than it felt two days ago but this story has a lot of twists in it. >> we will be here to tell you all about it. michael is telling us all about what is happening among banks. julie: investor mark mobius give some perspective on the u.s. dollar.
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mark: live from london, i am mark barton. counting you down to the european close, six minutes away. julie: i am julie hyman. templeton emerging markets -- emerging markets group
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says the currency has surged to the highest in more than a decade. asked what a donald trump presidency would mean for the currency? >> i think in the short-term the dollar isn't getting stronger but in the longer term, i think the heavy spending that he is going to bark on, not only in infrastructure but defense, will result in people starting to think that maybe this dollar shouldn't be as strong as it is now. we are probably going to see a weaker dollar. julie: in the wake of the brexit vote, mobius says politicians and central banks need to wake up to political risks around the world. >> i think they are beginning to realize that their policies are not working. they have been pushing on the strings, so to speak.
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be evening systems have to given up. they cannot continue them. europe see japan and moving in the direction that the u.s. is moving. julie: that was mark mobius of templeton emerging markets group. mark: we are heading to the close, four minutes away. taking equities. it is widely expected to extend its program from march 2017. that is the biggest one now. stocks at the highest level since september 22. the close is four minutes away. ♪
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mark: live from london and new york, this is the european close. stocks finishing up the day with the third consecutive rise for the third day.
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led by autos and insurance. three days of gains, best run since november. tonight is the highest since september the 22nd. what a rally we have seen for banks. rebound, since july, almost a five-year low to 45%. that is some rebound. due to news from credits which as earlier, rising as much 8.7%, the biggest gain since february 2015. , itowers profit targets pledges to cut almost $1 billion in costs and in asset management and investment banking forces the chief executive to adjust his turnaround plan. today, shares were credited since october, when they first announced the turnaround plan, shares have lost 41% of their value.
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investors questioning his ambitions and profit goals. this is the price of credits which, the blue line and the white line. andwent down 40% in july isse is down a mere 25%. the dutch male operator rejecting its new competitor. sayingal take over regulatory issues triggered by the deal would hamper operations and hurt employees. dutch employees and large customers and labor representatives raising objectives -- objections including to the percentage the state government would hold.
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u.k., u.k. the manufacturing output unexpectedly contracting. falling in the last month. this is in october. pharmaceutical slumping, the .9% drop comparing forecasts of a .2% increase. the biggest decline since february. fallingal production 1.3 percent, driven by a slide into oil and gas. the danger does highlight the lopsided nature of the economy. since reichs it the economy -- brexit, along with construction and services, the economy grew by .5% in the third order. despite today's contraction, the economy looks in pretty good shape post-brexit.
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julie: let's look at u.s. stocks where we are not seeing much movement. the dow is trading on a closing basis with any game we see today. the s&p earlier touched a record and the nasdaq continues to lag today. splitgain, through the within the groups within the various indices, looking across assets, oil is the notable mover in the wake of that report that showed a big drawdown. saw a build in inventories in oklahoma. all of that is contributing to the decline in oil prices. the dollar is down 2/10 of 1% so we are not seeing the inverse trade. the yield on the 10 year down to 2.36% at the moment today. something else we have been watching closely has been that
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at&t and time warner hearing on capitol hill on their proposed $85 billion merger. we are looking at a picture of al franken of minnesota, who has been an expected opponent of this deal. already the senators have talked about concerns about the competitiveness of the industry following this kind of deal. the ceo has responded saying that concessions can be made to address the senators concerns. we will continue to bring you any headlines. you can watch it on live go. let's check in with erik johnson from our newsroom in london. isitaly's prime minister calling it quits. he tweeted that he would be resigning two hours from now. after said he would quit voters rejected a constitutional reform referendum that he supported. the president asks to stay in
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office until the senate passed the budget. that takes place earlier today. syria says it has seized three quarters of the rebel held part of aleppo. it comes less than two weeks after launching offensive. several rebel groups have proposed a five day cease-fire so the wounded, sick and other civilians in be evacuated. a majority of americans say donald trump should not have to sell his business empire to avoid conflicts of interest. that is according to the first bloomberg national poll since the election. 69% say it goes too far to force him and his family to get rid of his hotels, buildings and golf courses. more than half of those polls say that his actions since the election make them more optimistic about his presidency. another warning about lockheed martin's fighter from the defense department's chief tester.
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michael gilmore says officials have been preparing misleading assessments. among his complaints, he disagrees with air forces f-35's having full combat capabilities. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am erik johnson and this is bloomberg. mark? so, supreme court judges or justices here in the u.k. are questioning some of the legal theories behind the challenge to the u.k. governments brexit plan. part of the final say the greece a holder referendum. it is taking place in parliament. now from westminster is bloomberg's tim ross. what is this debate about in parliament? does it change anything? byfirstly, it is an attempt
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theresa may's opponents to get her or her government to spell out in more detail -- any detail -- what exactly they want to get out of brexit. that is the number one thing. the second thing is that theresa may has said "ok, i can come up with a plan and i will tell you what the plan is." but in exchange for that, she is challenging her opponents to sign up for her timetable. which, as we know, is for her to trigger article 50. that's by the end of march next year, so that is the key thing that is going to be voted on later on in parliament today. mark: how much of a climbdown is this for theresa may? how much is she going to reveal to those who want more revealed on her plan? >> we won't know.
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she came up with a new frame today. brexit means brexit. she says she wants a red, white and blue brexit, it is not clear what that means but we did get a few more details. one of the things that is important about the fact that these debates are happening now in parliament is that every time a minister comes to answer questions from lawmakers they can be persuaded to part with a little more detail and that has happened today. secretary has told lawmakers during the course of this debate that he is weighing up four options for staying or leaving the customs union. these include potentially adopting a norway style model or a switzerland style model. he also says that at the end of the process, he will make sure that lawmakers in this country
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do get a say on the final brexit deal. mark: of today, it is fascinating because it is not binding. the referendum was not binding. does that mean it actually doesn't matter? >> i think it does matter politically. every time a minister comes to answer questions, they can be persuaded to give a little bit more information. gradually, we are building up a picture and it is practical of what brexit might look like. year, they were answering questions from lawmakers and he said he would be willing to consider continuing to pay contributions to the eu in order for the u.k. to keep access to the single market and that was, again, only because he was answering questions about it. so the vote will not actually be binding on the government. mark: the other big event that takes place, day three of the
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supreme court hearing. does today's vote negate the outcome of the supreme court hearing which we won't know about until january? >> no. i think the government would love it if it did. that case is far bigger of a headache than today's proceedings in parliament. if we lose the case in the supreme court, the government of theresa may is likely to bring forward a piece of legislation that will then be debated in the house of commons in parliament. lawmakers and the opposition say they would likely want to amend ok, and rewrite it and say, the u.k. must stay part of the single market. that could delay things and delay is the lasting theresa may wants. mark: thanks for joining us today. bloomberg tim ross joining us from westminster. julie: we had a record by the
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skin of its teeth. the s&p 500 rising to an intraday record. it is up 4/10 of 1%. 22.1519 is where it is right now. estate, telecom and utility stocks are rising today. groups are getting some relief. coming up, we go back to italy where prime minister renzi is expected to dine this evening -- to resign this evening. ♪
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julie: i am julie hyman. this is bloomberg markets. mark: i am mark barton. time for the bloomberg business
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flash. we look at the biggest business stories right now. the u.s. government's investigation into charter violations of sanction laws is almost complete. that is according to two people. the probe has to do with sanctions involving iraq, sudan and other blacklisted countries. investigators want to know if there have been any violations since 2007. the british bank paid $667 million to settle that early approach. british regulators have fined u.s. drugmakers and distributors for increasing the cost of an epilepsy drug by the 600%. officials say the companies charged excessive and unfair prices for pfizer's drug. who pushed walmart to raise its minimum wage have a new target. retailer toe
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improve security in stores and parking lots. 's investigation by bloomberg widespread crime at walmart stores. that is the latest bloomberg business flash. julie: italy's prime minister matteo renzi will officially stepped down in just about an hour after suffering a crushing defeat in that referendum. he had been wavering on whether he would go through with it. joining us from rome is flavia rotondi. why has it been such a difficult decision for him? why all the back-and-forth? >> you are right. probably, it was trying to gain time. matterelapresident
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asked him to stay a little longer. might have wanted to discuss the situation further with him. at the moment he says it has been decided. he will meet with the president at 7:00 p.m.. that should be fine but at matterela will accept. he was due to speak any time as the democratic party meeting is taking place in rome. this is not happening anymore. they will probably just send a message. we do not have an idea of what really happened today. mark: and then, presuming he does offer his resignation, then what happens next?
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what is the timeline of filling the leadership post. point, he might he might try to just stay on for a bit longer in order to form a possible government or he might accept that. the presidente, will need to speak to the makers and party leaders about the personality and temporary prime ministers. -- about the policy on temporary prime ministers. minister and the head will see. by the end of this week we might have a name and we don't know
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exactly when the elections will take place. for more on the deal having elections for the end of january morebruary, it has been because the president really wants to change the electoral law. it might take a little longer. mark: and if the elections take place, flavia, depending on whether that law is changed, what sort of position is the five-star movement in right now? >> we are adopting a wait and see situation. is unseatoral law right now. we haven't had actually very strong reactions to what has happened so far. people have been very kind,
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civilized comments and behaviors so far. we have seen it later. mark: some optimism around the italian banking sector today. we will see a whole host of banks rise on expectations. stateht see some sort of aid when it comes to monte dei paschi. what are we hearing? you, this is really a condition of what will happen now with the resignation in government. beon't expect anything to announced formally before we know what will happen. i could say that probably we will take a few more hours. mark: all eyes on italy. in romeflavia rotondi today.
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coming up is battle of the charts. now, they have turned into one of the most volatile groups in the market. we will prove it to you with a chart next on bloomberg. ♪
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julie: it is time for our global battle of the charts where we take a look at the most telling charts of what they mean for investors. you can access these on bloomberg by running the fiction -- function at the bottom of your screen. kicking things off is dani burger in the studio. >> i just took a peek at my competitor but i'm going to show you why mine is better. i am looking at consumer staples. these are the soap makers and the diaper makers. they are not supposed to be keeping you up at night but they
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are. ofs is a 30 day volatility the index versus the s&p 500. the s&p 500 is in purple. it usually swings much more wildly. but look at what has happened over here since the election. this is the widest spread of these two since 2000. here, investors are also getting short interest at a record high for the effort in 2006. definitely something interesting that has happened in the market and you should keep your eye on it on #ecb. titlek: and i love the julie:. mark, i believe you are looking at another side of the same coin . .ark: don't even go there rallying cyclical, the european
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cyclical start, that is according to deutsche bank. the blue line cyclical versus defensive. and since july, we have seen a massive outperformance in cyclicals. the outperformance has been by 24%. highlighting this sharpened sector rotation, triggered in large part by this move up to minors and automakers, industrial groups can outperform those defensive sectors boosted by hopes that global growth could bounce back. if cyclical stocks are already priced for a sharp acceleration, the average forecast for next year is 3.1%. the year after, 3.3%. they expect bond yields to stabilize which should help defend those stocks, those real
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estate stocks, those telecom stocks. but it is a wonderful chart, showing you that massive outperformance in those cyclical stocks in europe since july. if you want to see my chart, see #btb. mark: it looks like investors are doing the same. it is interesting that the phenomenon is happening in europe and the united states. julie: i hate picking winners because you are essentially talking about the same story. daniht get and head to here, and the short interest is indeed surprising but you would both win if it were really up to me. mark: i will take that. julie: something else we are watching is tomorrow, the european central bank decision at 7:45 eastern. we have full coverage of president mario draghi's news noontimee at 8:30 a.m.
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on bloomberg markets. mark: just finishing up, on the third day of gains, the best run for a month. highest since september. it is all about what you are promoting. the expectation is mario draghi and his fellow policymakers will extend their bond buying program , expected to end in march 2017. they are buying so much to look forward to tomorrow. that for the european close, stocks rallying for the third day. bloomberg markets continues. ♪
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>> it is noon in new york, 5:00 p.m. in new york and best in london and midnight in hong kong. gura.avid
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david: from bloomberg's world headquarters in new york, covering stories from washington to rome and taipei this hour, we are watching lawmakers grill the ceos of at&t and time warner over whether their tieups would help consumers. stocks-- pharmaceutical have rallied but now the president-elect is vowing to bring down drug crisis. -- drug prices. halfway through the trading day, abigail doolittle is here with a look at the markets. >> the gains may not be large but we are looking at gains. we now have the dow and the s&p 500 trading at record highs. now, one pocket of extreme strength for u.s. stocks, we're looking at some of the telecom stocks, at&t of course. donald trump yesterday said that


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